Lemy v. Direct General Finance Co., 2014 WL 903371 (11th Cir. March 10, 2014).

 The Eleventh Circuit upheld the District Court’s denial of motion to remand, finding that when the percentage of recovery from a foreign defendant far exceeds the percentage of recovery from the local defendant, then significant relief is not being sought from the local defendant.

 The plaintiffs, Gardith Lemy and Marilyn Hill, brought a class action in state court, alleging that a group of defendants acted in concert to sell plaintiffs a worthless insurance product in violation of the Florida Insurance Code, specifically surplus lines insurance, which covers things such as ambulance services and hospital stay bills.  The Florida Insurance Code regulates surplus lines insurance and provides that surplus lines insurance may be sold to supplement general line insurance under certain conditions.

 The defendants removed the action to the federal court under CAFA, but the plaintiffs moved to remand the case under the local controversy exception, which withdraws federal jurisdiction where the class seeks significant relief from a local defendant.  The District Court found that the plaintiffs did not establish the applicability of this exception to federal jurisdiction and denied the motion to remand.

 On the merits, the District Court dismissed the plaintiffs’ complaint, with prejudice, holding that the Florida Insurance Code sections implicated did not provide for private enforcement.  Moreover, the District Court found that, even if the Florida Insurance Code did provide for private enforcement, the defendants’ conduct did not materially violate those sections.  The plaintiffs appealed.

 At the outset, the Eleventh Circuit noted that a local defendant is significant when, inter alia, the plaintiffs seek significant relief from him.  First, inasmuch as the relief that the plaintiffs sought was the restitution of the insurance premiums paid by the Florida class, the District Court compared the shares of the premiums retained by a local defendant to those retained by the foreign defendant.  The District Court determined that, as a matter of fact, the local defendant retained only 4.5% of the total premiums paid by the class, while the foreign defendant retained 80%.  In finding this fact, the District Court interpreted the evidence, credited certain testimony, and drew reasonable inferences, which it was entitled to do.

 The Eleventh Circuit noted that in Evans v. Walter Industries, Inc., 449 F.3d 1159 (11th Cir. 2006), it was explained that the plaintiffs must show that the relief they sought from a local defendant is significant portion of the entire relief sought by the class.  The Eleventh Circuit observed that this conclusion could be reached through comparing the relief sought from the local defendant to that sought from the foreign defendants.  In this case, the District Court concluded that 4.5% of the total relief sought against one of the local defendants was not significant as compared to the 80% sought against one of the foreign defendants.  The Eleventh Circuit found that this conclusion was not erroneous.  (Editors’ Note: See CAFA Law Blog analysis of Evans posted on May 25, 2006.)

 According to the Eleventh Circuit, the fact that the plaintiffs sought declaratory relief from the local defendants did not change this result. The complaint did not distinguish between the declaratory relief sought against the local as opposed to the foreign defendants.  Therefore, this claim did not militate against the conclusion that the leonine share of the relief sought was that from the foreign defendants.  Accordingly, the Eleventh Circuit upheld the denial of motion to remand.

The Eleventh Circuit similarly found that the District Court correctly held that the plaintiffs could not assert the claims that they had advanced in their complaint.  The Eleventh Circuit explained that their claims relied on code sections that did not provide for a private right of enforcement.  Furthermore, violations of these code sections do not render the sections void, thus, permitting the resurrection of common law claims.